Ford's President of the Americas Mark Fields saw his team deliver near-record earnings in North America.
Near-record profits in North America and continued strong performance from Ford Credit could not offset the bleak economic news from Europe and other parts of the world that slashed Ford Motor Co.’s profitability by 57% during the second quarter.
The company reported a pre-tax operating profit of $1.8 billion, or 30 cents per share, and net income of $1 billion, or 26 cents per share. Revenue was $33.3 billion, a decrease of $2.2 billion from the second quarter of 2011.
While Ford officials still expect a strong operating profit for 2012 the maker said it now expects net earnings to decline for the year, primarily based on the problems in Europe. The maker also saw setbacks in Asia.
“We have faced challenging situations in other parts of the business before, and successfully addressed them through our One Ford plan,” said Bob Shanks, Ford executive vice president and chief financial officer. “We will continue to use our plan as the guide to address challenges and opportunities in our valued European operations.”
Those operations reported an operating loss of $404 million compared to a $176 million profit a year earlier. And Ford is warning it expects to lose $1 billion in Europe for all of 2012. The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to these developments.
“We are reviewing all areas of our business to address the near-term challenges, while ensuring we build a strong foundation for our future,” said Shanks. “It is premature to discuss details of what our plans may be in response to the situation in Europe, but we will continue to communicate our plans at the appropriate times with all of our stakeholders.”
Complicating matters, Ford also showed weakness in Asia where it is struggling to catch up with rivals like General Motors and Volkswagen in key markets such as China.
While Ford’s numbers are likely to be seen in a harsh light overall, the maker did reveal a silver lining in its home market. Ford North America recorded its second straight quarter with profits of more than $2 billion and an operating margin exceeding 10%, while Ford Credit reported a pre-tax operating profits of $438 million, a decrease of $166 million from second quarter 2011, in line with expectations
“The Ford team delivered another solid quarter driven by the strength of Ford North America and Ford Credit,” said Alan Mulally, Ford president and chief executive officer.
“We remain absolutely committed to continuing to make progress on our One Ford plan,” the CEO added, “including dealing decisively with near-term challenges, investing for future growth, and developing outstanding products with segment-leading quality, fuel efficiency, safety, smart design and value.”
Ford finished the second quarter with automotive gross cash of $23.7 billion, an increase of $700 million during the quarter, even after making payments of $800 million to its worldwide pension programs, of which $500 million were discretionary payments to U.S. funded plans.
Meanwhile, the maker reversed its recent trend of paying off the huge debt it ran up as it prepared for the recent recession – a move that helped it avoid a federally assisted bailout but which saw it mortgage assets that included its Blue Oval logo. Recent increases in its debt rating to investment grade helped the maker regain control of those key assets.
Ford finished the second quarter with debt of $14.2 billion, up from $13.7 billion, which the maker says was the result of drawing from low-interest loan sources to help fund new advanced technology vehicles. The maker has planned to have five different battery-based models on the market before mid-decade, including the upcoming C-Max Energi, a plug-in people-mover.